Employer Retention Tax Credit (ERC) for Business.
Your Business Get Partially or Fully Shut Down in 2020 Due to COVID-19?
What is the ERC?
How Much Is The Credit?
Claiming Your Credit
What is the ERC?
The Employee Retention Credit (ERC) is a newly expanded refundable tax credit given to employers who are keeping their employees on payroll despite COVID-19 related challenges and losses. New legislation was passed in late December 2020 that made many businesses eligible for the credit for Q1 & Q2 of 2021 who were not previously eligible in 2020.
How Much is the Credit?
The credit is equal to 70% of your employee’s wages that you pay out from January 1 through June 30th, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter. The maximum ERC amount available is$7,000 per employee per quarter for a total of $14,000 in refundable tax credits for 2021 and potentially up to $5,000 per employee for 2020.
This means if you have 10 employees on your staff today, and meet the eligibility requirements, you could be eligible for up to $140,000 in a refundable tax credit that you can start receiving right away through your payroll tax filings.
- Employers who were under full or partial suspension mandated by governmental orders that limited commerce, travel or group meetings due to COVID-19
- Employers with fewer than 500 employees
- Decline in gross receipts less than 50% of the same quarter in 2019
How Can I Claim Credit?
The credit is claimed against your payroll tax filing deposits (941s) or by reducing your employment tax deposits. Any credit that exceeds your employment tax deposit can be refunded to you by a check from the IRS, or you can amend previous 941 returns and request a refund. Your payroll partner will be able to help you claim and track this credit.
Be sure to consult your CPA or banker to understand the best way to maximize PPP Round 2 money and the ERC. ConceptHR will support your business by maximizing the benefits of both credits and how to claim them for optimal refunds if engaged for PPP and Tax Credit Services.